Fulcrum Diversified Liquid Alternatives Fund
Diversified Liquid Alternatives (DLA)
Evolution or Revolution?
A new alternative investment solution with:
- Broad exposure across Real Assets, Alternative Credit and Diversifiers
- Daily liquidity
- No performance fees
- Nimble approach to new ideas
- Integrated Responsible Investing framework
- Long-term investment horizon
Who is the Fund for?
We have designed a fund that seeks to address the challenges listed further down and which aims to meet the specific needs for several major client groups.
How we have designed the Fund
Our rationale and philosophy for the Diversified Liquid Alternatives Fund is based on our belief that Liquid Alternatives can provide a valuable investment opportunity for investors.
How can DLA help diversify away from equity risk, especially in down markets?
We recognise that alternative investments can become less liquid and perform poorly when equities fall. As a result, we have built into our approach the following safeguards to manage this risk:
- Our diversifiers bucket is designed to be genuinely uncorrelated to equities and bonds
- We allocate dynamically between sub-strategies over time based on our own macroeconomic views
- We can reduce exposure if we see choppy waters ahead and/or implement portfolio hedges
Challenges of investing in Liquid Alternatives
Liquid alternatives can provide useful portfolio diversification for investors, however, implementation poses several challenges:
- Alternative investment strategies can be expensive
- There can be a painful mismatch between the liquidity you need and that which is available from the fund you have invested in
- The correlation with equities remains stubbornly high and, with the exception of a few select circumstances/strategies, you might not achieve the diversification you initially sought
Our Diversified Liquid Alternatives solution aims to overcome these challenges.
We have categorised Liquid Alternatives into three broad groups: Real Assets, Alternative Credit and Diversifiers. Each group has several sub-strategies which are included based on how easy they are to liquidate at short notice in normal market conditions. Our approach includes exposure to Real Assets, Alternative Credit and Diversifiers.
- Real Estate Securities / REITS
- Listed Infrastructure
- Listed Agriculture / Timber
- Natural Resources / Energy
- Invests across High Yield
- Secured Loans
- Securitised Credit
- Emerging Market Debt (external and local currency, corporate debt)
- Momentum Strategies
- Absolute Return Strategies (Merger Arbitrage, Discretionary Macro, long/short Equity and Alternative Risk Premia)
Responsible Investing in Liquid Alternatives
We believe that innovation in Responsible Investing can lead to improved investment returns.
Thoughts on Dynamic Asset Allocation in Liquid Alternatives
In this note, we turn to our process for dynamic asset allocation, which involves dynamic idea generation, portfolio construction and monitoring.
Matthew Roberts joined Fulcrum in early 2018 to develop the new strategy. He was soon joined by Mark Horne and they are now a team of six.